I know, I’m rushing the fences a bit. But I’m just at the point in Miller and Page when, having whetted our appetites with simple examples, they are getting ready to ratchet up the complexity. They pause to review a few key points. Two paragraphs leap out at me.
While our model gives us some useful intuitions and insights, it is also (quite intentionally) very limited. Like all good models, it was designed to be just sufficient to tell a story that could be understood easily yet have enough substance to provide some insights into broader issues.
This view of the role of models as “just sufficient to tell a story” yet “have enough substance to provide some insights” strikes me as very important. It wards off the nay-sayers who want the whole truth — making any story but one told by an omniscient God insufficient. Yet it also demands more than a casual tale based on mere opinion. It allows the serious critic to demand some beef without insisting on the whole cow.
What, then, of formal elegance and the difference between simple formulas and the computational use of formulaic rules to which Asher directs our attention?
In economics, formal modeling usually proceeds by developing mathematical models derived from first principles. This approach, when well practiced, results in very clean and stark models that yield key insights. Unfortunately, while such a framework imposes a useful discipline on the modeling, it also can be quite limiting. The formal mathematical approach works best for static, homogeneous, equilibrating worlds. Even in our very simple example [the towns with the two kinds of chillies], we are beginning to violate these desiderata. Thus, if we want to investigate richer, more dynamic worlds, we need to pursue other modeling approaches. The trade-off, of course, is that we must weigh the potential to generate new insights against the cost of having less exacting analytics.
My eye is drawn to the word “trade-off,” a term with which practical politicians, business people, and engineers are comfortable but, if Deirdre McCloskey is right in “Bourgeois Virtue,” most academics are not. Academics, McCloskey suggests, tend to favor either aristocratic or peasant views of virtue; one asserts a punctilious view of honor, the other fiercely defends a turf; both cling to positions and regard the compromises that “trade-off” implies with disdain. It’s the difference between, “Is that assumption right or wrong?” and the more pragmatic “What does that assumption buy us?”